224. Memorandum From the Under Secretary of State for Economic Affairs (Cooper) to Secretary of State Vance1

Foreign Economic Policy Implications of the Cabinet Changes

The foreign exchange markets have been under very great pressure since Monday.2 Despite large-scale intervention, coordinated mainly with Germany, the dollar has depreciated against all major currencies. This reaction is attributed to the President’s speeches not being sufficiently dramatic on energy.3 Then on Tuesday “the Cabinet fell”.4 [Page 655] There is a widespread misinterpretation of the oral resignations in other countries, where the public wrongly associates it with the fall of a government under a parliamentary system. But there is a general impression of disarray even among those who understand our system of government.

On specific individuals: apart from you and Harold Brown, the only Cabinet member of great importance to foreign policy is Mike. As you know he had a rocky start (he was charged in 1977 with trying to “talk down the dollar”), but since then he has built a very strong and deserved reputation abroad as being solid, substantive and a useful check on some of the more radical ideas that arise in various parts of the Administration. I do not doubt that his resignation will be taken badly (except perhaps by the Russians, who were not highly enamored of him). Tony Solomon’s reputation is limited largely to official and financial circles, but his departure would also be lamented. He is strongly attached to Mike, but he is willing to stay on under a new boss if that is necessary to smooth the transition.5

Juanita Kreps and Jim Schlesinger are both widely known and respected abroad but I do not believe that there would be strong foreign reactions either to their retention or to their departure. Abroad, as at home, Schlesinger gets blamed for an inadequate energy policy, so his departure might be a visual plus for the Carter Administration in foreign eyes; but that of course is merely cosmetics.6

  1. Source: National Archives, RG 59, Office of the Secretariat Staff, Records of the Under Secretary of State for Economic Affairs, Richard N. Cooper, 1977–1980, Lot 81D134, Box 6, Memorandums, 1979. Eyes Only. Drafted by Cooper.
  2. July 16.
  3. On July 10, Carter declared the existence of a nationwide energy shortage and imposed emergency restrictions on building temperatures; five days later, he addressed the nation on the energy crisis and laid out his administration’s new energy policy. The following day, July 16, he discussed the energy crisis in a speech before the National Association of Counties in Kansas City, Missouri. For the text of Carter’s July 10 proclamation, his July 10 message to Congress on the building temperature restrictions, his July 15 national address, and his July 16 remarks in Kansas City, see Public Papers of the Presidents of the United States: Jimmy Carter, 1979, Book II, pp. 1226–1228, 1235–1247.
  4. On July 17, Powell gave the following statement to the press: “The President had a serious and lengthy discussion with his Cabinet and senior White House staff today about the priorities of his Administration. He reviewed with them the progress of the past few years and the problems which remain. All members of the senior staff and Cabinet have offered their resignations during this period of evaluation. The President will review these offers of resignation carefully and expeditiously.” (Terence Smith, “Carter Offered Resignations by Cabinet and Senior Staff; Some Going in Days, Aides Say,” The New York Times, July 18, 1979, p. A1)
  5. On July 19, Powell announced Blumenthal’s resignation and Carter’s nomination of G. William Miller as his replacement; see Public Papers of the Presidents of the United States: Jimmy Carter, 1979, Book II, pp. 1273–1275. On July 24, Brzezinski assured Schmidt that the Cabinet shuffle “did not imply any foreign policy shift. This was particularly true in the financial field where Bill Miller would continue implementing the policies which Mike Blumenthal had tried to carry out.” He also noted Carter’s “firm commitment toward meaningful long-range energy program.” Schmidt replied “that he did not expect any major changes in U.S. policy” and asserted his “full faith in Bill Miller,” stressing that “Miller’s rapid confirmation was particularly important for the international monetary situation.” (Memorandum of conversation, July 24; Carter Library, National Security Affairs, Brzezinski Material, Brzezinski Office File, Country Chron File, Box 14, Germany F R: 6–7/79)
  6. Carter accepted Schlesinger’s resignation on July 20 and Kreps’ on October 4; see Public Papers of the Presidents of the United States: Jimmy Carter, 1979, Book II, pp. 1290–1291 and 1818.